Deferment is an option for borrowers who are having difficulty making student loan payments. If approved, you can stop making payments for a set period of time in order to postpone or delay payments in the future. To qualify for deferment, you must meet certain criteria, but the process is relatively simple. Because private lenders rarely offer loan deferment for any reason, this guide only applies to The Department of Education, Federal loan deferments.
Part 1: Making the Decision to Defer Student Loans
1. Recognize that the deferment is only temporary. If you are having difficulty making student loan payments, you should understand that deferment is only a temporary solution. Your loans are not “forgiven,” and you must resume making payments once the designated deferment period expires.
Deferment is best used for temporary difficulties, such as losing a job or working through graduate school. If you have a longer-term financial situation, you may want to apply for an income-based repayment plan instead.
2. Remember that interest on your unsubsidized loans will accrue/accumulate. During a deferment, the government will cover (not charge) interest on your subsidised loans, but interest will be calculated and added to your loan balance if you have unsubsidized loans (including PLUS loans). You are not required to pay that interest during the deferment period, but you will eventually pay it and more over time. Any unpaid interest during the deferment period will be capitalised (added to your balance), resulting in higher future interest payments.
If you have one of the following loan types, you may not be required to pay interest on it:
Perkins Loan from the federal government.
Loan with Direct Subsidization
Federal Stafford Loan with Subsidy
If you’re not sure how much of your loan balance is unsubsidized, you can find out by visiting the National Student Loan Data System. This website will provide you with a detailed breakdown of all your federal student loans, including which are subsidised and which are not.
3. Comply with the requirements for a “in school” deferment. You are eligible for a deferment if you are enrolled at least half-time in college, graduate school, or professional school. This deferment will last until you graduate, drop below half-time enrollment, or leave the programme.
The requirements for half-time enrollment vary by institution. Check with your school to see if you are eligible.
Inquire about graduate fellowship, internship, and training programmes that may also qualify for a deferment. For more information, contact your loan servicer.
4. Based on your income, you may be eligible for deferment. If you are unemployed or have a part-time job but are unable to find full-time employment, you can apply to have your student loan payments deferred until you find suitable employment. You may also qualify if you are experiencing severe financial hardship for other reasons – check with your lender for specifics. In general, you will be required to provide documentation in order to qualify for this type of deferment.
The maximum period of deferment is three years. Following that, whether your financial situation has improved or not, you will be required to make payments once more.
5. Learn about other circumstances that may qualify you for a deferment. Borrowers in a few other situations may be eligible for deferment from the Department of Education. These are some examples:
Military service on active duty during a war or national emergency.
If you are called to active duty during a war or a national emergency, you can join the National Guard.
Volunteering with the Peace Corps.
Admission to a full-time disabled rehabilitation programme.
Part 2: Requesting a Deferment
1. During the application process, you can continue to make payments. You must continue making payments until your application is approved; therefore, do not stop just because you believe you meet the eligibility requirements. When you receive notification that your deferment has been approved, you can stop making payments for the specified time period.
If you intend to apply for a deferment, contact your loan servicer right away. This way, if you have to miss payments before your application is approved, the servicer will be aware of it.
2. Please contact your loan servicer. Requests for deferment must be directed to your loan servicer, not the Department of Education. Start by contacting the servicer, speaking with a representative, and determining whether you actually meet the eligibility criteria for a deferment.
What documentation you must provide as proof.
How long will the approval process take?
How long your deferment will be in effect.
3. If you want to defer a Perkins loan or seek an in-school deferment, contact your financial aid office. In addition to contacting your loan servicer, you may need to contact your financial aid office.
If you need a deferment because you are returning to school, the financial aid office at your programme will need to confirm your enrollment with your loan servicer, so check in and find out what forms you may need to submit.
Individual schools administer Perkins loans; therefore, if you want to defer a Perkins loan for any reason, you must contact your financial aid office to find out what your school’s requirements are.
4. Please provide any documentation that is required. Depending on your loan servicer and your specific circumstances, you may be required to demonstrate your eligibility for a deferment. This could include the following items:
If you are claiming unemployment, you may be required to demonstrate that you are being paid for a part-time job (showing a paycheck, for example) or that you are receiving government unemployment checks.
If you are claiming financial hardship, you must provide proof of your low income (you might show proof that you are receiving public assistance).
If you are a member of the military or the Peace Corps, you must provide proof of service.
5. Comply with any additional requirements. Your loan servicer may require you to fill out and sign application forms. Make sure you follow the deferment process that the servicer has in place.
Part 3: Alternatives Research
1. Inform your lender that you are having difficulty making your payments. Lenders, in general, do not want you to default. You may be able to get some assistance if you inform them of your situation. For example, you might be eligible for a consolidation loan, which could lower your payments by combining two or more loans into one.
If you are going to be late or unable to make your payments, notify your loan servicer right away. The longer you go without making payments before contacting the servicer, the more difficult the problem will become. If at all possible, avoid allowing the situation to spiral out of control.
2. Investigate forbearance. If you are unable to obtain a deferment, you may be able to obtain a forbearance instead. Forbearance, like deferment, allows you to temporarily stop making payments; however, it is less advantageous because interest continues to accrue whether your loans are subsidised or not, and forbearance is limited to one year. If you meet any of the following criteria, contact your loan servicer:
Serving a full-time internship in medicine or dentistry.
The lowest payment for which you qualify is 20% or more of your monthly income.
You teach in a school and subject that are eligible for teacher loan forgiveness.
You are a member of AmeriCorps or another volunteer service organisation.
Before attempting to obtain forbearance, always consider requesting a deferment.
3. Change your payment schedule. If you are not eligible for deferment or forbearance, you may be able to reduce your payments. Contact your loan servicer to ensure that you are on the best payment plan for your circumstances.
Persist in obtaining information about applying for any income-based payment plan. Make sure to specifically ask your loan servicer about any repayment plans you hope to qualify for. Get detailed information and instructions on how to apply, as some lenders will not tell you about these benefits if you don’t.
4. Bankruptcy will allow you to discharge your debts. If you truly cannot make your student loan payments, your only option is to declare bankruptcy. There is no guarantee, however, that your student loans will be discharged during these proceedings. It is extremely difficult to demonstrate in court that your student loans are causing you enough hardship that they should be forgiven. If you hire a good bankruptcy lawyer, you may have a better chance of success.
If you have excessively high medical bills or a condition that will prevent you from earning income for the foreseeable future, your chances of success improve.
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